The Race to Win Payment

One of the emergent frontiers in mobility concerns one of the most entrenched elements of consumer interactions — payment. And while there have been major updates on the payment front over the last half decade or so, there are some bigger changes in store. And, if you get in on the ground floor, it could be your business that benefits from the shifting landscape.

For our purposes, when I say payment in this context, I’m referring primarily to interpersonal payment — that is, payment that occurs in person. This can be at gas stations, restaurants, coffee shops, the mall, whatever. And, there are a few companies trying to upend the way consumers pay for their respective goods.

According to the Federal Reserve Payment Study, about two-thirds of consumer and business payments were made with payment cards. In 2003, 43 percent of all US-based noncash payments were payment cards (debit, credit and prepaid cards primarily). In 2012, that number has grown to 67 percent. Credit and debit card transactions have grown 7.6 percent and 7.7 percent each of the last three years, respectively. In 2012, that was good for 122.8 billion transactions combined, for a total value of $79 trillion.

Some of the companies making inroads into the growing payment sector focus more on merchants’ ability to accept card payments. As I’ve shown, more and more consumers are using payment cards to pay for things, so it’s only natural that merchants large and small would want to capitalize on that.

With the proliferation of smart phones, a group of payment solutions providers have created hardware, apps or both to enable companies or individuals to accept payment cards as well as direct transfers from mobile devices. Companies like Square, Intuit, and PayPal sell portable card readers that plug into a smartphone to allow both merchants and individuals to accept credit card payments.

Banks and third party companies — like Venmo, Evenly (which was acquired by Square), Google, and PayPal — have created applications that allow you to transfer money between individuals with smart phones. These are often linked to a bank account or payment card, but it takes the actual card swipe out of the mix.

Some companies are trying to completely reinvent the payment card itself. Coin, the first player on the scene, has developed a payment card that can store up to eight credit, debit, gift cards, etc. on one “smart card.” You program cards onto Coin through a mobile app and card swiper, then select between the cards you want to use by pressing a simple button on the Coin card. Plastc, the newest entrant into this space, has taken it a step further. It has an e-ink touchscreen display that allows you to PIN lock your smart card, swipe between stored cards, shows your picture and signature when you pay, interfaces with your mobile phone to tell you when you’ve left it somewhere… And, both Coin and Plastc are the same size as a normal credit card and will work at any merchant that already accepts cards.

Finally, some of the heaviest hitters in the mobile ecosystem are trying to remove the need for cards altogether. The biggest announcement on that front came from Cuppertino last month, with the unveiling of Apple Pay. Apple Pay will allow iPhone users to tap their phones to Near Field Communication (NFC) enabled terminals and pay directly from their device, removing the need for the actual payment cards altogether. Google Wallet has similar capabilities, but adoption hasn’t really caught on. Apple is hoping it can succeed where other NFC solutions have not.

As you can see from the raw numbers, non-cash payments are a gargantuan business and many of the biggest technology companies are trying to get in on the action. Whether that’s making it easier for merchants to accept payments, enabling people to send payments to one another through their mobile phones, consolidating all your credit, debit and gift cards onto one “smart card,” or eliminating cards altogether, the race to win the battle over payments is heating up.